Insurance Europe has responded to a consultation conducted by the European Insurance and Occupational Pensions Authority (EIOPA) on its draft supervisory statement on the use of reinsurance risk mitigation techniques (RMT).

While EIOPA has acknowledged reinsurance as an effective way to mitigate risks that an insurer either cannot bear on its own or does not have the appetite to do so, insurers are concerned that the draft supervisory statement could restrict the valid use of reinsurance RMT.

Furthermore, EIOPA has failed to provide evidence to justify an additional regulatory burden related to the use of reinsurance RMT. Unnecessary increases in regulatory burden might deter insurers from accessing reinsurance and thereby increase riskiness and price of insurance, which would not be in the interest of policyholders.

On the contrary, there are already sufficient protections within Solvency II which ensure that capital levels remain appropriate to the risk profile of the insurer and supervisory convergence can already be achieved. Reinsurance which achieves risk transfer should be recognised in Solvency II based on current requirements, and no additional EIOPA rules which restrict the recognition of certain reinsurance contracts are needed.